to build a better tomorrow. >> that's why we're here. >> additional corporate funding for "washington week" is provided by prudential. additional funding is provided by the annenberg foundation, the corporation for public broadcasting and by contributions to your pbs station from viewers like you. thank you. once again, live from washington, moderator gwen ifill. gwen: good evening. we had an unexpectedly entertaining not to mention consequential week. the topic remain from cabinet nominees to the federal budget all bracketed by good economic news, a record close on wall street as well as more jobs on main street. but at this very time last week, we were being told for the sky to fall as across the board

budget cuts took effect. so why the good economic news? >> the numbers that came out friday were positive. 236,000 jobs created across the economy. the private sector even stronger. this is against the backdrop on a bunch of other good news, the stock market making its first new high since 2007. a rare good week for wall street and main street. to keep these in context, neither of these numbers suggest that the economy is racing ahead. in fact, it's still growing at 2 1/2% the same rate it was growing last year. the impressive thing is that it's doing this in the face of so many head winds. gasoline prices have gone up. most economists would have anticipated some slowing in growth by this point. we just haven't seen it. gwen: you have to explain why we misled our viewers to think that

the sequester is going to be a big deal and so far, it's not. >> nothing really happened. most government agencies still haven't furloughed any employees because they need to give 30 days notice. as the white house itself pointed out in terms of greeting the great economic news, let's remember that the report friday morning is a snapshot several weeks before the sequester took place. obviously, the economy still has some hurdles ahead. it has to deal with the sequester. most people think it will be manageable. it looks like we're not going to get a government shutdown. the possibility of a debt ceiling later on. we work our way through those sorts of things. the story looks pretty positive for the economy. gwen: there are people their entire argument was spread cate on other side of the aisle on the idea that this was or was not going to be a big deal, the

sequester, the word i hate to use. what was their reaction on capitol hill? >> there's a reality that this is sort of here to stay until they find some longer term alternative. one thing they tried to do this week is pass a spending bill to hopefully head off a government shutdown but that would give the pentagon some more things to implement these cuts. i do think that one thing to look for and one thing is that a lot of people said it's not going to be immediate. there was a build-up by the obama administration to say that this deadline march 1, but these furloughs have to be given at least 30 days notice. a lot of pentagon employees have to have a 60-day notice. it's going to be mid april and beyond. that's when we will start to see job losses, long lines at airports. that's when you're going to see some renewed pressure on members

of congress to take a more serious look at what these cuts are doing. gwen: is there an incentive for the president and congress to get this figured out? they were hoping for a million in the beginning of these discussions? >> yeah, we've taken a deep breath partly out of exhaustion, political exhaustion from the fiscal cliff, this crisis, that crisis. and the sense that i get from talking to members of congress and both parties is that they would like to take a step back from that. you've seen some pretty ugly things happen. you know, this fiscal cliff ended up with this tax increase and the spending cuts that were supposed to be so terrible, there would be the incentive not to do them. but i do hear especially from republicans, they don't want a government closure. that did not work out well for them in the mid 1990's.

so there is a pull-back. but there are a lot of hurdles to make any significant changes beyond this. gwen: i'm curious though about this revenue issue because in some ways, one of the things that john boehner, the house speaker came out and said that it's off the table that there would be anymore revenue. from the short run he's right. >> it certainly looks that way. but what's intriguing that the administration's response is let's not try to move around the immovable object of speaker baner or the senate minority leader mitch mcconnell who is dead set against that. that's why you set the outreach to paul ryan, the chairman of the budget committee perhaps in hopes of maybe doing an in-run around the leadership. gwen: does what happen in washington matter when it comes to wall street or when it comes to these job numbers? is washington action or inaction

driving the markets at all or depressing them? >> oh, absolutely. i would say that the main reason that the stock market has had such a good strong start to the year is because washington didn't tank the economy of doing a variety of silly things like defaulting on the national debt. the absence of a negative is a positive. gwen: it goes without saying that there is a lot of distrust in washington. each side assumes that the other is acting in bad faith especially when it comes to this budget cuts we're talking about. >> the republicans are using the c.r., the continued resolution to fund the government to put in their sequester cuts. they're playing games again. >> clearly, people are tired of the political gains in this town. and they want to see a resolution of some problems. >> everybody accused everybody else about political gains. this was viewed with disdain by people like scott walker, wisconsin's republican governor. >> you had the sequester but before that you had the fiscal

cliff. you have all these in some ways manufactured or self-manufactured crises out there. the congress kicked the can down the road but they don't really solve things. gwen: we love our metaphors. both sides hit the pause button for at least a while this week. beginning with house passage of that budget bill that may have avoided a budget cut. the first is bipartisanship? >> it is. but there is still a prospect for a government shutdown here. gwen: what? >> john boehner warned of it this week. the senate is looking at ways to playboy expand the flexibility. and john boehner said on thursday this week. he warned if the senate gets greedy. if they get greedy and mess with it, we could be back at having an argument and if we do it will be the senate democrats' fault.

we're close but we're not there yet. gwen: what we saw in the continuing resolution to keep government running, we saw the house agree to something which is not something the democrats in the senate which is controlled by democrats would necessarily agree to. and that's the next hump, right? >> that's right. we've gotten so far away from the way budget making is supposed to be. we learned in civic classes. the senate hasn't passed a budget bill in like four years which republicans love to remind themmability. we've -- them about. we have the continued resolutions called the c.r. which basically funds the government at the old year that it was. you hit something important when you talked about speaker boehner saying we absolutely cannot have more revenue increases, that's the thing that house republicans have stuck to welded themselves to more than anything else. it's really remarkable. one thing you had the sequester

go through is because the -- the -- the drive among republicans not to let taxes go up was greater than the incentive not to let the pentagon take these hit which there was a time when they thought the republicans would let the congress take the spebting cuts. yes, they did because keeping income tax from going up was more important. gwen: that's what forced all the bipartisan in a moment. a discussion was one of the things that republicans love to bring up the most which is part of the problem that has been going on in washington is the lack of certainty. and so now does this -- is it to be assumed from the behavior and the reaction of wall street and the reaction of the market and the reaction of the jobless -- of the housing construction agency -- industry that they now think, hey, well, things are looking for certain or are they thinking it's not going to matter what we do? >> uncertainty is always there. all businesses deal with uncertainty. and they always accept the

facthat washington is going to play games and make life difficult for them. i think what was hard on the economy was when the inordinate amount of uncertainty and the possibility of not just tax increases or spending cuts but of catastrophe, default, the government shutting down. anne i think the fact that both sides -- and i think the fact that both sides have shown the exhaustion is an important source of market building in the market. i wonder whether that confidence is appropriate. for example speaker boehner also reiterated his condition that before he raised ceiling he has to have equal spending cuts. does he mean that? >> i think he does. one of the things that republicans give themselves wiggle room is cuts are reform. when you talk about reform, one of the things that republicans have pointed to is raise the medicare age. they consider that a reform that's not necessarily a spending cut.

gwen: let's talk about this flexibility issue because one of the reasons why they're able to get this bill through the house is they carved down a little room for the pentagon, a little room for the department of veteran affairs so they cannot take as deep a cut as they propose this across the board sequester which they want to make perm nenlt. the senate -- they want to make nerm -- permanent. the senate keeps talking about that. >> there is a little bit more bipartisan in the senate. it sends to be more of a creature of the senate to be trying to have a flexibility of the senate. so much flexibility has been put towards the military spendsing. we should give others the flexibility. which congress should be doing business to begin with is doing regular spending bills instead

of c.r. which is auto pilot. they've been letting things go on autopilot. gwen: one of the things that happened this week is conversation. one night there was a dinner at a posh washington hotel if you watched from the white house, about dozen republicans invited by john mccain and lindsay graham, the president's them in cease. and then the next day the president had lunch with paul ryan. what is happening? what is going on in washington that's shifting this from what we've seen before which is basically people yelling at each other from opposite sides of pennsylvania avenue? >> even though president obama obviously won the election, the republicans have dug in so hard especially on this income tax issue that we were talking about earlier. and i think to some degree the democrats were taken by surprise. for example when you had that fiscal cliff fight that was right at the owned the year, in fact, it went into january 1, president obama was in a

position to take a larger revenue increase if he really wanted to. he chose not to. he dialed it down a little bit thinking there would be more down the line. i think he's taking a somewhat different approach, well, let's try to reach out more, to have more conversation with members. he has tried this before. i mean, it's not the first time. gwen: which is why people thought he wasn't going to try it again. >> it's a good thing to do. you want your leaders to be talking with each other. some people are getting a little carried away. thinking this is going to be a great breakthrough to a great bargain that's questionable. just because you have dinner with someone, you might feel a little better but you're probably not going to change your bedrock principles and they're really clashing on this. gwen: entitlement reform, social security and medicare reform, and nobody talks about that.

>> the president said i had a whole bunch of these things on the table. they cut tain cuts to fees paid to medicare providers. changes inflation for social security. what's not out there is changing the retirement age for medicare which is the minimum that republicans would accept some type of entitlement reform they want. it looks to me that the break point will be taxes. and one of the reasons i think you saw the president reaching out to some republicans is that a few of the republicans have said we're willing to raise taxes beyond what we did in january provided we get the entitlement reform. if there is one, we'll probably begin there. gwen: and there is still to discussion -- i just want to say with you for a minute, greg, the one problem in these unemployment numbers is the long-term unemployed are still a problem. they're the ones that took the hit with these across the board

budget cuts and no one's figured out how to address that. >> the long-term unemployment is getting worse. you can see evidence that if you've been unemployed for six months your odds are not that bad. the longer you stay unemployed, people start to look at you like you're actually someone they don't want to hire. and that's a consequence. every economist basically says you want basically easy does it on the austerity now. we're doing the opposite. gwen: and then there was this other piece of drama. the rand paul filibuster a nearly 13 hour tour deforce that forced the white house to respond. >> i'm not asking any questions about the president's motives. i don't question his motives. i frankly don't think he will be killing people in restaurants tonight or in their house

tonight. but this is about the rule of law. it isn't so much about him. it isn't so much about john brennan. it's about having rules. gwen: that administration response came in a one-paragraph letter from the attorney general. dear senator paul, it has come to my attention that you have now asked an additional question. does the president have the authority to use a weaponized drone to kill an american not engaged in combat on american soil? the answer to that question is no. sincerely eric h. holder jr. not every republican loved his tactics. >> i don't remember any of you coming down here suggesting that president bush was going to kill anybody with a drone. i don't even remember the harshest critics of president bush on the democratic side. they had a drone program back then. so what is it? all of a sudden that this drone program has gotten every

republican so spun up. what are we up to here? gwen: spun up, chuck. what was rand paul up to here? >> rand paul was talking about something that hasn't gotten a tremendous am of attention and that is this policy of using drones with weapons to kill terrorists or suspected terrorist in foreign countries and it included an american citizen. he became a jihadist -- gwen: but the question is whether it should be extended to american soil. >> he said how much will you extrapolate that. if an american was sitting in a cafe. he was trying to draw a bright line. and was trying to make a point. rand paul is a libertarian as he is a republican. there is at least one democrat ron widen joined him in this effort. it's an important question to be

raised. gwen: but only one democrat. this is something you would hear democrats complain about. they weren't there. not even the most liberal ones. >> aside from sort of the fascinating nature of the filibuster and the way hi did it, the politics behind it were fascinating. we're in a time now where there is a very notable lack of liberal voice on the senate floor for a position that i think was aligned through the democratic party through the bush administration. not only did he filibuster but the senators that came to the floor to show their support for him or voice their support for him not limited to mitch mcconnell the majority leader, late at night. john cornyn, two senators who are facing primaries in 2014. marco rubio, another presumptive 2016 candidate. lindsay graham made a very interesting point about can you

imagine the leading republicans in the senate during the bush administration raising the questions that they were raising. it's just completely upended the political paradine -- gwen: big difference with the tea party pressure. >> we focus so much on the tea party, and low taxings, low spending but this is the other area where the libertarian, no big brother played out. this is where it causes some of the republican establishment some real problem. so you saw john mccain the former presidential nominee hitting paul on this issue. how to deal with the tea party on fiscal issues and social type of issues and policy issues is another question. gwen: is this one of these cases where the democrats decided this isn't my fight, i'm going to let

them fight themselves? >> i think it's party loyalty. sitting senators of a sitting president don't go on the floor and go after them. ron widen who has been very consistent on this issue which is ideologically consistent. but i would not be surprised to see a big liberal rally for barack obama. gwen: thank you, everybody. we're going to leave you just a few minutes early this week to give you the chance to support your local pbs station which in turn supports us. the conversation will continue online on the "washington week" extra. we will tackle everything we didn't tackle this week. keep up with me on the pbs newshour and we'll see you next week on "washington week." good night.

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